>Offshore Oilfield Services (PINC RESEARCH)

Drilling for value....

Offshore Oilfield Services form an important segment of the oilfield value chain. It includes all activities involved in upstream exploration of hydrocarbons in the offshore environment including drilling, construction and support activities. While offshore capex has peaked after five years of scorching growth, we believe there are pockets of value for domestic players to continue the growth momentum, albeit at a slower pace.

■ Hydrocarbon capex has peaked, but will not subside: We believe that capex in this space peaked in 2008 after 5 years of scorching growth and upstream players will go slow on incremental capex. However, we also believe that oil exploration should continue at a slower pace, given the fact that oil is a perishable commodity and it has faced numerous feast and famine situations in the past.

■ Domestic demand to remain robust: With ONGC being a major upstream player in the domestic market with a clear mandate of ensuring energy security, the demand aspect of exploration is ensured for players with a strong domestic presence.

■ Shallow water players to emerge: Contrary to popular perception, we believe that shallow water players should experience renewed demand despite incremental supply coming in, mainly because with softening oil prices, deep water exploration is fast becoming prohibitive.

■ Niches waiting to be exploited: With the scorching pace of oil capex in the last five years slackening, there is room to breathe for upstream players and focus on revamping an ageing infrastructure. This will give business to players in offshore construction and maintenance space.

To see full report: OFFSHORE OILFIELD SERVICES